1. Field of the Invention
The present invention relates to financial business systems; and more particularly to a system and method for inquiry and processing of trades made pursuant to employee stock plans, including employee stock option plans, restricted stock award plans, and employee stock purchase plans.
2. Description of the Prior Art
In recent years, employee stock ownership through stock plans has become a popular form of incentive compensation. Stock ownership provides an opportunity for employees to share in the growth potential of a company, thereby creating work incentives. Stock plans are easy for the sponsoring company to establish, primarily because they do not require any financial targets. They also offer numerous other advantages to employees and employers alike. For example, stock ownership provides the ability to realize unlimited gains. Ownership can also be tailored to specifically benefit those employees whose actions impact the stock value. For employers, stock ownership enables a company to attract and keep talented employees without draining cash reserves to pay high salaries. Employee stock plans include Employee Stock Options Plans (ESOPs). A stock option is a right granted by a company to an employee to purchase a fixed number of shares of stock at specified price and within a specific period of time. Stock options include nonqualified options which are taxed as ordinary income, and incentive options, which are eligible for special tax treatment if held long enough after the exercise and grant date. When the stock options vest, they can be exercised to obtain shares. The shares can then be held or sold by the employee. The decision to exercise stock options depends on a number of factors, including the value of the underlying stock, taxes, timing and employee financial circumstances. Like stock options, Employee Stock Purchase Plans (ESPP's) afford a method for employees to purchase company stock, through payroll deductions or otherwise. Employers purchase company stock for participating employees on a scheduled basis, such as two times per year, based on the money accumulated for the participating employee up to that time. Employers may also implement Restricted Stock Award (RSA) plans. Restricted stock can be acquired by an employee in various ways, including through the exercise of stock options, as bonus shares, or as compensation. As the name implies, various restrictions are placed on the employee's ability to sell these types of shares.
There has been recognition that computer-based financial systems can be used to automate the stock option exercise process. U.S. Pat. No. 4,823,265 to Nelson discloses a system and method for processing transactions in renewable options in stocks and other securities using a computer-based system. The system provides for the automatic renewal of options for a fixed term, until a designated event occurs, or perpetually. U.S. Pat. No. 5,671,363 to Cristofich et al. is directed to a data processing system for administration of stock option accounts that manages and tracks a plurality of individual accounts, current stock pricing, individual biographic data, company option plans and current withholding and other tax requirements. The system exercises select options pursuant to a specific participant request or the happening of an event, such as the market obtaining a participant selected target price for a security. The system accomplishes this task by real-time access to participant information pertaining to present or future stock option rights. Once exercise is effectuated, the system bundles the individual transactions across multiple participants and sends this to the exchange as a single security transaction. The system uses a corresponding brokerage account held in the participant's name to implement the actual trades of stock necessary for option exercise.
Neither the Nelson nor the Cristofich et al. systems are capable of processing trades made pursuant to both company sponsored stock option and stock purchase plans. In addition, these are complicated systems, requiring substantial means to support the automatic processing of option transactions upon the happening of a specific event.
There remains a need in the art for a simplified system for implementing employee stock plans, which does not require a concomitant full-service brokerage account or real-time access to employee demographic information. Moreover, there is a need for a full-featured system that provides comprehensive services and features to the employee/participant, employer, internal users and others, in an efficient manner.
The present invention provides a system and method having the above and other advantages.